Below is the schedule of cash flows for Investment PEK and Investment PVG. 1. Using the NPV, and IRR as criteria, which between Investment PEK and Investment PVG will you choose? Which is the best decision criterion? Justify your answer. Note that your capital outlay for Investment PEK is RMB 85,000.00 and your capital outlay for Investment PVG is also RMP 85,000.00. Assume that the interest rate is 10%. 2. How will your answer in (1) change if the interest rate increases by 5%? 3. How will your answer in (1) change if the interest rate decreases by 5%? 4. Comment on the impact of changing the interest rate on your NPV and IRR. Year-end Cash Flow Year PEK PVG 1 30,000.00 50,000.00 2 30,000.00 20,000.00 3 30,000.00 24,000.00 4 30,000.00 26,000.00 5 30,000.00 18,000.00
Below is the schedule of cash flows for Investment PEK and Investment PVG. 1. Using the NPV, and IRR as criteria, which between Investment PEK and Investment PVG will you choose? Which is the best decision criterion? Justify your answer. Note that your capital outlay for Investment PEK is RMB 85,000.00 and your capital outlay for Investment PVG is also RMP 85,000.00. Assume that the interest rate is 10%. 2. How will your answer in (1) change if the interest rate increases by 5%? 3. How will your answer in (1) change if the interest rate decreases by 5%? 4. Comment on the impact of changing the interest rate on your NPV and IRR. Year-end Cash Flow Year PEK PVG 1 30,000.00 50,000.00 2 30,000.00 20,000.00 3 30,000.00 24,000.00 4 30,000.00 26,000.00 5 30,000.00 18,000.00
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1CMA
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